Grocers eager to open up shop in North Texas

North Texas has plenty of new rooftops, and that means more mouths to
feed.

It’s good news for the grocery business that Texas has eight of the 15
fastest-growing large U.S. cities and five of the 10 cities that added the most
people over the year, including Dallas, Fort Worth, Frisco and McKinney,
according to U.S. census data.

After focusing on Dallas neighborhoods with new stores and remodelings,
chains are looking again to the suburbs for growth. Some are making bigger
investments by opening their own distribution centers.

Idaho-based WinCo plans to open several large-format supermarkets in North
Texas beginning next year.

Aldi, which opened its first Texas store in 2010, now has 41 stores in the
region and expects to double its Dallas-Fort Worth store count in a few years.
The German-based grocer opened a store on Loop 288 in May, four years after
opening a distribution center in Denton.

Target has opened a distribution center in Denton dedicated to food. Market
Street just bought out its distributor in Roanoke, signaling that it wants to
open more stores.

And the region appears to have passed a litmus test with Trader Joe’s. It’s
opening its third area store in Dallas in August and its first Texas
distribution center in Irving later this year. That will allow it to ratchet up
its Texas expansion.

Whole Foods will have new stores in Colleyville and Flower Mound next spring.
Whole Foods’ planned Uptown Dallas store is scheduled for early 2015, and it’s
scoping out an in-town Fort Worth location. North Carolina-based Fresh Market is
reportedly coming into Dallas after opening in Houston this summer.

And Wal-Mart, which has the largest market share in Dallas-Fort Worth, added
10 stores to the region in the last year and has others under construction in
North Dallas and South Dallas.

Wal-Mart’s local market share increased 1.1 percentage points to 27.8
percent, according to newly published data for the year ended in March.

“There’s still plenty of opportunity for Wal-Mart in D-FW. We’re still
looking for ways to grow here,” said Wal-Mart regional general manager Dacona
Smith. “It’s not a mature market for us.”

The world’s largest retailer has a whopping 109 Supercenters and Neighborhood
Market stores in Dallas-Fort Worth. It also operates 20 Sam’s Clubs here,
including one in Denton.

Uneven shares

Depending on who’s counting, the region’s grocery business is worth $14
billion to $17 billion a year.

Grocers ask themselves, “Where can we find growth?” said Craig Rosenblum, a
partner in the grocery industry consulting firm Willard Bishop LLC. “Retailers
come here because of the diversity, spending habits and demographics.”

Population growth is fueling “higher comparable-store sales across the market
for us,” said Scott Huska, Aldi’s regional vice president. “We continue to see
new customers in all our stores.”

But population growth isn’t lifting all boats.

Among conventional supermarkets, only Kroger increased market share last
year, to 14.5 percent, up 0.2 percentage points, according to the 2013 annual
report published by Tucson, Ariz.-based Metro Market Studies. Last year, Kroger
opened three stores, remodeled 10 and added six fuel centers. Kroger will open
120,000-square-foot Marketplace stores in Wiley in July and Forney in
November.

Tom Thumb and Albertsons continued to lose market share. “I'm not sure what
kind of recipe for profits that is. The market is growing, and Tom Thumb and
Albertsons are losing market share,” said Ed Fox, a marketing professor at
Southern Methodist University.

Especially out in the farthest suburbs, shoppers have shown they prefer to
shop in big-box stores, Fox said. “Wal-Mart’s market share increase is very
significant. Kroger is holding its own. It’s very aggressive.”

Albertsons and Tom Thumb declined to comment.

Tom Thumb opened a store in Flower Mound in October and will open one in
Frisco this fall. This month, it closed a store in East Dallas and remodeled an
existing store.

Flower Mound has become a grocery magnet: In addition to Whole Foods, Market
Street has a store under construction there, and Tom Thumb opened its fourth
store there in October. Kroger is expanding one of its stores there.

“The Roanoke distribution center gives us an opportunity to grow again. We
went from 2009 to 2013 without opening a store in the market,” said Market
Street spokesman Eddie Owens.

Market Street, a division of Lubbock-based United Supermarkets, has six
stores in the area, and all of them have “seen solid sales growth” in the last
year, Owens said.

WinCo, which has so far disclosed McKinney and Fort Worth locations, believes
its large stores and low prices will win shoppers over. WinCo stores are about
90,000 square feet, or twice the size of a traditional supermarket. The
Boise-based chain is also employee-owned.

“We plan for Dallas-Fort Worth to be a significant market for us,” said WinCo
vice president Michael Read.

Price wars

WinCo’s focus on low prices is going to be interesting to watch.

When Aldi came into the market, milk and egg price wars ensued. Aldi’s Huska
said he thinks the market has become less competitive. Milk and egg prices are
up from last year, he said.

The Dallas market was one of the first where Wal-Mart started doing its
basket challenge ads. The ads, which have been running since April 2012, compare
Wal-Mart prices to those at Kroger, Tom Thumb and Walgreens.

Wal-Mart has said it has invested $1 billion in lowering prices as it also
feels competition from dollar stores, Rosenblum said. “It takes time to get
credit for that.”

Wal-Mart spokeswoman Molly Philhours said that in markets where the campaign
is running, stores have higher comparable-store sales and traffic.

“For me, my husband and our two children, it costs us about $1,600 a month to
eat healthy. That’s sad. It shouldn’t be that way,” said Jahilyn Isaksson, 34,
of Dallas. “If we ate fast food, of course, it would be a lot cheaper.”

Isaksson has noticed that Wal-Mart has beefed up its organic and fresh foods,
but she says those items are more expensive there, too.

Mark Grogan, 59, of Dallas said overall prices have been creeping up over the
past year. He shops around: Wal-Mart and Sam’s Club for larger items, Whole
Foods for oat bread and traditional chains for convenience.

“Packages of things like paper products and crackers are getting smaller at
the grocery stores, but the prices aren’t,” Grogan said.

Leaving a Tom Thumb in North Dallas on Monday, Grogan said he needed some
ingredients for a cake.

“In a case like this,” he said, “when I need sour cream and marmalade, I just
came to the store closest to my house.”

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